End of March greetings from Kansas City and Cedar Rapids. Fortunately, spring has sprung in both locations, including near one of the many Instagram walls in downtown Cedar Rapids. This town is at its finest between April and October, and we plan on spending a lot of time enjoying the outdoor scenes.
This Brief will focus on one earnings word for three of the five telecom companies we track. In the follow up Brief after the Easter holiday, we will focus on cable’s Q1 earnings approach.
The Fortnight That Was
The Fab Five are flirting with the two trillion-dollar market capitalization lost milestone for 2026, a figure not seen since 2022. Each stock in this group (except Alphabet) has lost all of the equity value gained in 2025, and one (Microsoft) has wiped out gains for both 2024 and 2025. Apple is the only stock that has not lost more than 10% of its value in 2026. With a lot of employee compensation tied to stock options, folks are starting to get nervous in Silicon Valley.
The picture is brighter for the Telco Top Five with each stock up for the year. AT&T and Verizon have each added more than $40 billion in value over the last 15 months, and T-Mobile has recovered about two thirds of last year’s losses. Importantly, the spread between T-Mobile and AT&T (#1 and #3 of the five telco stocks we track) is $28 billion. Entering 2025, it was $93 billion.
All eyes are on the impact of fluctuating gas prices on economic activity. One of the data points we track is the Truflation CPI rate (link to their X account is here). We have found the Truflation data to be a good barometer of directional change, although the exact amount differs considerably from the official figures published by the Bureau of Labor Statistics. Nearby is their current view of inflation, which, according to the company, is now back to January levels. While we think a 1.8% level might be too low, it is likely that the increase in prices since the Iran War began is close to 1.0%.
As with all trends, the impact for the United States is going to vary by geography. Here is the latest gas price nap by state from AAA (data here):
In the Midwest, gas prices are up about $1/ gallon since the war began. In California, gas prices are now at $5.86/ gallon, up 90 cents in a month. Filling up the tank in the Golden State now runs between $80-120, about $40 more than the same 15 gallons purchased in Iowa, Oklahoma, or Kansas. There is little doubt that this will likely accelerate the movement to electric vehicles for longer commutes (a full home charge will likely run $12-16, although 3rd party or public charging may run more).
How much the war will impact first quarter economic growth is anyone’s guess. The current GDP Now estimate (here) is 2.0% growth for the first three months of the year. This reflects a changing mix of consumer spending (including the impact of higher mortgage rates), business investment, and net exports. Our view is that business spending will likely pull back if the war continues past Memorial Day, and while it is highly unlikely that economic growth will turn negative, the economy will likely be more focused on defense spending in the short-term.
As the University of Michigan Index figures show nearby (data here), this impacts consumer spending outlooks. War increases anxiety, and gas (and food) prices remind us that conditions are not rapidly improving. As the expectations index shows, the survey participants are about as anxious as they were about the Liberation Day tariffs. Thanks to larger 2026 tax refunds (+$351 per family – data here), current economic conditions are more muted. Bottom line: The country has lived through a lot over the last 13 months, and the impact of successful outcomes (better trade agreements and a more peaceful Middle East) could be tremendous. They are far from guaranteed, however, and that has many consumers nervous.
Several of you asked for our take on the Los Angeles jury verdict against Facebook/ Meta and YouTube/ Google/ Alphabet. It may be a bit early for the defendant to claim victory in this case, and, as this New Tork Times article points out, the jurors sought to avoid a large damages award. Our take on the potential for product changes as a result of the final verdict is “be careful what you ask for” as alternative age verification measures put into place might arouse privacy concerns.
Q1 Earnings Preview in One Word
As the table nearby shows, earnings season is right around the corner. While there are some common themes (e.g., current or upcoming acquisition integration), each telecommunications company we track has a different “to do” list driven by differing views of competition and the marketplace. In this Brief, we assign one word that best summarizes AT&T’s, Verizon’s, and T-Mobile’s each company’s Q1 performance.
AT&T: Converged
If we could have one “bingo” word that every AT&T executive will use for the next five years, it would be converged. The company is singularly focused on owning the converged wireless + fiber offering. Here is the chart from fourth quarter earnings that shows their metrics (note: this chart excludes Lumen, which closed in Q1):
Convergence drove the acquisition of the Lumen mass markets fiber subscribers. It drove the accelerated deployment of the Echostar spectrum (which powers AT&T Internet Air). It drove a majority of 4Q postpaid consumer retail wireless net additions (200K homes of growth in the fourth quarter at 2.4 subscribers per home = 75% of AT&T’s 680,000 4Q wireless postpaid additions). Every investment makes their converged offer more attractive.
Jeff McElfresh, AT&T’s Chief Operating Officer, spoke at the Morgan Stanley Technology, Media & Telecom Conference earlier this month. While lengthy, we think he clearly articulates the company’s convergence strategy:
“Now at AT&T when we think about investing as we are at the highest levels of anybody in this industry, what do we hold ourselves responsible to?
One, we’ve got to drive penetration into that investment.
Two, we’ve got to sell multiple products to get even stronger returns.
And so our strategy to serve the best highest performing quality product in a converged manner drives these LTVs that we’re seeing and keeps these customers incredibly loyal and sticky. We’re not competing on promos. We’re not competing on just pricing actions. We’re competing on performance in value and the more we do, the better the brand performs in these markets. And I think that’s an important note that discipline that we hold ourselves to is something that has generated very attractive returns… During this competitive environment as we continue to drive convergence, we’ve delivered in 4th quarter very strong wireless growth, strong fiber growth, strong EBITDA, expanding margins… we’re still in expansion mode. We are still growing and as we expand this fiber network and we run this convergence play we gain even more and more scale.
Ultimately, AT&T will have the absolute best, largest fiber network that is a superior technology that can serve traffic at the lowest marginal cost of any other technology in the industry. And we complement that with a modernized open 5G network that is now fully fueled with a very impressive mid-band spectrum portfolio, so owning and operating both of those networks gives those at AT&T the ability to serve customers where they want to be served, offering the right performance and the right value.”
Where AT&T is deploying fiber, the strategy could not be clearer. Our only question is “what about the regions where AT&T is not upgrading their infrastructure to fiber?” The company seems to want to address that in part through more fixed wireless (AT&T Internet Air). But that will, by their own admission, be less effective against fiber-based converged alternatives (and we assume with the BEAD mandate that nearly every home will have a fiber-based broadband alternative).
Our bet is that some variation of convergence is mentioned at least 30 times during their earnings call. It’s an effective strategy for the 60 million homes that they will eventually reach. We aren’t sure how existing AT&T customers living in Manhattan or Philadelphia will be retained, however.
Verizon: Turnaround
We don’t think that Dan Schulman, Verizon’s CEO, or any of his executive team has any pretense that transformations are easy and quick. What we will hear from Verizon in April is that some things are easy to modify while others take quarters (or longer). They will not proclaim a quick end to their efforts and will set aggressive but achievable expectations. We have a lot of questions about the impact of 20% capital reductions from the previous year but admit that implementing a new plan without C-Band expansion might be easier than it appears.
Dan recently summarized the sense of urgency when he spoke at the same Morgan Stanley conference referenced earlier:
“There are probably four or five things that I’m focused on. I mean, the first was to be massively blunt and transparent inside the company. I mean, first thing you have to do is admit you have a problem, and I wanted to be very upfront with the company that we could not be complacent, that we were losing in the market. Losing is unacceptable, that I was there to win in the market, that Verizon was no longer willing to cede market share, that we were going to grow through volumes, and we were going to have a sustainable top line that didn’t come from short-term revenue.
Price increases without corresponding value to it, and so that was all about like going head on into the culture of Verizon. We were too bureaucratic, too hierarchical, too process focused, not outcomes focused. We didn’t move fast enough. We’re risk averse. And I will say, the company really reacted to that, and I have no tolerance honestly for anything but that.
We have a saying inside Verizon now that every day matters, and I firmly believe that every day matters. If we aren’t getting better every day and I want to measure that, then we are falling behind. Because any time the pace of change external is greater than the pace of change internal, you’re falling behind. And so, seizing the wheel, I’m just saying like we need to recognize where we are, we need to believe in what we are doing and what our future looks like, is essential.”
For those of you who are new to Verizon’s quarterly progression, here’s their latest five-year view of consumer subscribers:
The trend is clear: some portion of the wireless consumer postpaid Q4 gains are always given back in the first quarter. This does not happen with their cable (MVNO) partners or at AT&T or T-Mobile (at least to the same extent). Big Red has a habit of perpetually putting themselves into the net additions hole to start every calendar year, then is forced to heavily promote to achieve customer expectations in the second half of each year.
Our prediction is that changes starting in Q1 2026. If there is a reduction in the consumer postpaid retail base, it’s going to be surprisingly small (50-75K subscriber loss). The size of font on the transformation “t” is going to be dictated by the size of the first quarter hole – the smaller the loss, the larger the transformation. Based on Dan’s brief discussion of the first quarter in the Morgan Stanley Transcript, we believe the hole will be practically nonexistent. This is going to drive a 4% or greater growth in the total network (including MVNO net additions).
Because of the “every day matters” mentality described by Dan in the earlier quote, we think Verizon’s results will positively surprise. But their competitors are also changing as well, and Verizon needs to be ready to counter more aggressive actions in the market. We have doubts that Verizon’s capital reductions are sustainable and think that additional cash flow growth will allow the company to add back some of the $4 billion year-over-year reduction.
T-Mobile: Accounts
T-Mobile is going to be changing their reporting metrics in the first quarter to emphasize accounts. They are reorganizing the company’s strategy around account growth using advanced digital experiences to make the process of acquisition and retention easier.
This account focus extends beyond the traditional telecom boundaries. Unlike their peers, T-Mobile is expanding aggressively into offering financial services. Here’s their slide on the topic from the recent Capital Markets Day:
The T-Mobile Visa card is the only credit card that customers can use to retain the $5/ month/ line autopay reward. This is not insignificant for large accounts, but debit cards and ACH withdrawals are also available as options. Having been a long-time T-Mobile Tuesdays (now T-Life) app user, we enjoy 1-2 perks per week (usually Shell gas discounts or the MLB.TV promotion offered at the beginning of every baseball season). As we have learned, however, those discounts are not exclusive to T-Mobile (e.g., one can save $0.32/gallon every NASCAR race day without T-Life).
If digital and technology efforts supersede improved network coverage as a priority for the company, investors should be concerned. That is not the case today, and we expect very positive updates on the company’s plans to grow their footprint breadth and depth on the Q1 call. The most important driver to Net Promoter Score is network quality, not app offers. T-Mobile knows this, and that’s why we expect to continue to see outsized wireless network investment compared to AT&T and Verizon.
We also think that business accounts are going to play a more prominent role in 2026 earnings. T-Mobile has long co-mingled growth and think that Q1 would be a good time to start to report business account growth and churn. The company remains the undisputed growth leader, and while Verizon’s net additions will surprise, T-Mobile will continue to post very impressive wireless growth.
That’s it for this week. In the next full Brief, we will continue our earnings preview analysis with a look at cable’s earnings outlook. In the meantime, if you have friends who are interested in being notified each time we publish a Brief, please have them sign up at www.sundaybrief.com.
Go Royals and Sporting KC!
Important disclosure: The opinions expressed in The Sunday Brief are those of Jim Patterson and Patterson Advisory Group, LLC, and do not reflect those of CellSite Solutions, LLC, or Fort Point Capital.
